Emerging market economies typically exhibit a procyclical fiscal policy: public expenditures rise (fall) in economic expansions (recessions), whereas tax rates rise (fall) in bad (good) times. Additionally, the business cycle of these economies is characterized by countercyclical default risk....

This paper makes three contributions: First, I construct annual time series of gross domestic investment and national saving in the U.S. for the 1897–1949 period using historical component series. I compare the qualitative and quantitative properties of the newly constructed series with the...

According to the Globalization Hypothesis, global economic slack should progressively replace the domestic output gap in driving inflation as globalization increases. We investigate the empirical evidence in favor of this prediction by using a Time-varying VAR. Two main results emerge from the...

We document how informal employment in Mexico is countercyclical, lags the cycle and is negatively correlated to formal employment. This contributes to explaining why total employment in Mexico displays low cyclicality and variability over the business cycle when compared to Canada, a developed...

This paper studies optimal monetary policy in an open economy with firm heterogeneity and monopolistic competition. I consider a two-country dynamic general equilibrium model where firms make decisions to enter and exit the domestic and export markets. I show that endogenous export participation...

International trade is frequently thought of as a production technology in which the inputs are exports and the outputs are imports. Exports are transformed into imports at the rate of the price of exports relative to the price of imports: the reciprocal of the terms of trade. Cast this way, a...

This paper introduces Heckscher-Ohlin trade features into a two-country dynamic stochastic general equilibrium model, and studies the international transmission of productivity shocks through trade in goods. This framework improves upon existing international real business cycle models in that...

The objective of this paper is to explain the observed international fluctuations by modifying the traditional modelling of the labor market in the two-country real business cycles model. Our intuition is that labor-market search can be useful to understand the propagation of international...

Financial crises in emerging economies are accompanied by a large fall in total factor productivity. We explore the role of financial frictions in exacerbating the misallocation of resources and explaining this drop in TFP. We build a two-sector model of a small open economy with a working...

This paper studies the effects of import-price shocks on measured output and productivity in a standard small open economy model and quantifies such effects in the case of the Korean crisis of 1997-98. I argue that it is the price of imported goods relative to the price of domestic goods but not...